GDC as a Bellweather: the Gaming Industry is Shifting Towards F2P and Cross-Platform
The Game Developers Conference is the world’s largest and longest-running professionals-only game industry event. As the target audience is not the gaming public, the focus and feel of GDC is very different from other recent conferences that we attended, such as New York Comic Con back in October 2011. We didn’t see a single cosplayer. Most of the sessions are hosted by developers sharing their insights and experience with various properties or companies hawking their upcoming games, platforms, and tools.
When I attended GDC back in 2010, “Social” was the big buzzword as there was a lot of attention paid to the burgeoning Social Gaming market. Skimming this year’s schedule, “F2P” (Free-to-Play) and “Cross-Platform” are the hot keywords.
Why the shift in focus?
Let’s talk about F2P first. In a nutshell, the business model is to entice players to download and try your game and convert some of them to paying customers. The concept has been around for years and as the Internet’s infrastructure has matured, it has become an increasingly cost-efficient and viable distribution platform.
Most Social Games have been F2P from inception, as the games are very lightweight to download, require no separate (e.g. Facebook Apps / Games) or minimal (e.g. App Store) installation, and have viral incentives to encourage players to rope in their friends.
However, the traditional gaming markets, PC Gaming and Console Gaming, have their roots in physically-shipped boxed products and the games were – prior to a few years ago – impractical to distribute en masse online as the game downloads were huge relative to the average customer’s bandwidth. The costs of real-world distribution are significant.
The synergistic rise of high-speed Internet access by ISPs and the maturation of CDNs (Content Delivery Networks) has made it feasible and viable to distribute even large games over the Internet. E.g. everyone I know playing SWTOR, which launched 3 months ago, downloaded the 20GB game instead of waiting for installation discs. Contrast this to Blizzard’s The Burning Crusade expansion for World of Warcraft just 5 years ago, where I dragged my wife with me to Target in the East Bay to stand in line with hundreds of other diehard WoW gamers at midnight to buy the game. (The game sold out about a dozen people after us, and there was a near nerd-riot LOL).
So the distribution side of making heavyweight MMORPGs F2P is there. But what about the monetization side? This in my opinion is the bigger challenge. How do you create a game that is sufficiently enjoyable without paying that it attracts and retains players, while still providing virtual goods and other perks that a fraction of the playerbase will gladly pay for? And how do you do this for massively-multiplayer games without creating a game that is essentially “Pay-to-Win”?
F2P is a bad word to the majority of MMORPG players, but that is mainly due to poor design and implementation rather than the concept being flawed itself. I’ve had both positive (Knight Online back in 2005-2006) and negative (Allods Online in 2010) experiences with F2P properties. Back in KO, one of my guildees, a pizza shop owner down in Brazil, was forking out hundreds of USD a month to maximize his enjoyment of the game, and I became a monthly sub ($15 USD) because it was worth it to me as a full-time working stiff who valued his free time.
The PC and Console Gaming industries have the benefit of watching what has worked with Social Games, which have proven that players will pay for convenience and for virtual goods, e.g. cosmetics / customization / in-game items, etc. Microtransactions FTW.
It’s only in recent years that some of the larger mainstream MMORPGs have transitioned to F2P, e.g. Turbine’s LOTRO and NCSoft’s Aion. Industry analysts and bloggers have been predicting the end of P2P (Pay-to-Play) games for a few years now, and while the industry is moving in that direction, P2P games are not dead yet – see EA/BioWare’s SWTOR and ArenaNet’s upoming Guild Wars 2 launch.
One huge reason why games are still P2P is that game developers need to recoup their sunk costs to reach product launch. E.g. the estimates for SWTOR have ranged anywhere from $100-200+MM USD. (The ironic thing: the most common complaint I’ve heard about SWTOR is the lack of endgame content or issue-free content. But hey we’re gamers and we’re never satisfied, amirite?).
And here’s the basic problem: how to make a P2P game scale its customer base over time. Having a hefty (e.g. $50 USD) price tag is a significant deterrent to acquiring new customers. Arguably no developer has figured it out aside from Blizzard with WoW, and even Blizzard started offering WoW to level 20 for free last summer.
As MMORPG developers sort out F2P, what I expect to happen is for the large-scale AAA-quality launches, e.g. the RIFTs’, SWTOR’s, and GW2′s, to be continue to be P2P at launch to recoup the sunk costs, and for those games to eventually transition to F2P but with mechanics that entice players to pay on a recurring (subscription) basis, expansion basis (GW / GW2), or microtransaction basis. We’ve already seen Trion Worlds offer new mounts (spider!) for a microtransaction even though the game is P2P and requires a monthly sub. This shift from P2P to F2P for a given game may be necessary to achieve a sustained net-gain of customers over time after the initial “burst” of customers at launch. And to do it right means that the developer would need to consider F2P mechanics before the game transitions from F2P to P2P.
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