Is free-to-play the future of gaming or just a cheap fad?

People don’t want to pay for games.
That’s what MCV was told repeatedly at E3. And indeed many of this year’s high-growth or most controversial games – World of Tanks, League of Legends, CSR Racing amongst others – were absolutely free.
Of course anyone that has followed this market as it has exploded over the past few years will know that these games aren’t exactly ‘free’. The publishers and developers make their money via premium subscriptions or micro-transactions where gamers can obtain extra items or in-game currency for a small fee.
The idea is simple and attractive. By removing the cost barrier, the potential market for a game is infinitely larger. And although the vast majority of those gamers will never spend a penny, the small percentage that do will often spend more than just £50.
Despite its recent popularity, free-to-play is not a new concept. It existed as early as the mid-90s, and could even be spiritually linked to the freeware scene. The breakthrough game was even developed in the UK – the MMO RuneScape arrived in 2001.
It then exploded in Asia and Korea, via games developed from major players such as Nexon, before slowing growing across the world. Although it took a combination of Facebook and iOS to finally make free-to-play a ‘thing’ in Europe.
“Five to six years back there wasn’t that many successful free-to-play games in Europe,” notes Scott Yoo, director of Game Service Division at Nexon Europe.
“But now the market is growing. What really changed the game was the expansion of social networking and mobile devices. I don’t think the Europeans were keen on discovering content online, particularly things offered for free. I think there may have been some bias towards free stuff. Lots of people were saying something free is very low quality. So there was some negativity towards it. But with the help of the social networks and mobile devices, people are more comfortable with playing online and that has benefitted the free-to-play market.”

FREE CONTROVERSY
In many ways companies such as Zynga – and before them Jagex and Bigpoint – pioneered free-to-play across Europe. But not everyone was in favour of the business model. Even today there are concerns that ‘freemium’ lacks transparency and tricks consumers into parting with cash.
“It’s not really free-to-play,” says Bohemia Interactive’s CEO Marek Spanel, the developer behind the smash hit Steam game Arma II.
The firm has also released a free version of the game.
“The cost of the play is not very transparent to users so while they may be tempted to think it’s a very good thing for them, I think it’s tricks people a bit. It’s difficult. Maybe if they put a note for parents about when kids play freemium games and then they are billed from their operator for some excessive amount.
“It’s more fair to do other business models. We are not even contemplating converting to freemium based. If you call a game free-to-play and then you start collecting money from the game, I don’t think it’s free-to-play. I think it’s a bit misleading.”
Yet slowly the games industry is coming around to accepting free-to-play. And, following the success of titles like World of Tanks and League of Legends, the major publishers are investing in big-budget, console-quality freemium titles. Ubisoft has just released Ghost Recon Online, Activision has teamed up with Tencent for Call of Duty: Online, while EA has invested in a multitude of free-to-play games, including the next game in the Command and Conquer series.
“We have great games and big brands,” says Sean Decker, VP of EA’s Play4Free division. “We are putting out games like Command and Conquer and making it free-to-play, and EA is behind this 100 per cent. We’re putting out a top-tier game from a top-tier franchise.
“EA believes this will become one of the dominant business models.”
FREE AND EASY
Browser and social games are only one part of the free-to-play boom. Smartphone gaming has played a significant role, too. In 2009 Apple introduced in-app payments for games sold via iTunes and freemium titles on iOS has since become the norm. They’re huge cash generators, too. iPhone game CSR Racing from Natural Motion is reportedly generating around £7.5m a month. And the free-to-play smartphone market is likely to grow further, with Japanese mobile giants such as Gree and DeNA making significant moves into the Western markets.
“There are multiple models in the market. But the item-based model is very strong, and it has been for us in Japan, just as it has been for Zynga,” says Gree’s senior VP of Gree’s EML business, Ryotaro Shima.
Gonzague de Vallois, SVP of publishing at mobile specialist Gameloft, adds: “Smartphones have become ubiquitous, mass-market devices. Today the vast majority of smartphone and tablet users are casual gamers. They’re searching for new high-quality risk-free experiences. Our focus on free-to-play games, like Ice Age Village, is simply a response to that demand. The free-to-play model makes our games widely accessible and gives customers the power to play things their way. The model also naturally limits piracy, but that’s not our primary motivation.”
FREE-FOR-ALL
The one downside to the sudden popularity of freemium is the sheer number of developers it has attracted.
And now that global giants like EA, Activision and Ubisoft are involved, it’s harder than ever for small indie developers to get noticed.
There are other emerging platforms for free-to-play games outside of mobile and PC, such as Smart TVs and even consoles (more on that over on page 22). But the sheer quantity of games – plus the fickle nature of social gamers – is beginning to hurt even the free-to-play pioneers. Zynga’s stock price continues to tumble and it has announced plans to close three studios and shed 100 members of staff. Meanwhile, Bigpoint has also just announced that it is making 120 redundancies, closing its US offices, while CEO Heiko Hubertz has left his position at the head of the company.
“The entire industry is going through a very challenging time,” said Hubertz.
“We are now already entering the consolidation time for the online gaming industry. For that reason, to go into such a time, we need really good people on board who know how you can grow strong out of this time. I think we will see some acquisitions, some mergers and maybe even some companies go bankrupt.
“We want to have a very strong management team to guide us through this time and after that, we want to be even stronger than we are today.”
And then there’s the spiralling cost of user acquisition (online talk for marketing), with companies having to spend millions to acquire significant numbers of customers.
Meanwhile, other big free-to-play companies are splashing out significant sums to acquire big licences
“The market is getting more and more competitive,” says Axel Schmidt, director of corporate communications at free-to-play giant Gameforge.
“The investment costs in online games are always rising. Also, the big majors are coming into free-to-play, they have noticed that you can make some major revenue there and you need premium licences to survive in this environment.”
So there are challenges. And not everyone is convinced that the model benefits the end consumer.
But free-to-play is no-longer a niche business model. Big brands from big publishers with triple-A production values are coming and will cost nothing to try out.
Over the three days we will be publishing details articles about the free-to-play market, and what it means for the UK, for consoles and for retail. Or you can read them all right now by downloading our free digital edition of last week's magazine.

http://www.mcvuk.com/news/read/is-fr...ap-fad/0105931