The current hot-button topic in gaming is the freemium business model. Employed in social games like FarmVille and Tap Zoo, freemium means offering access for free, but charging for in-game content (customization, gameplay advantages, etc.).
The obvious benefit of this business model is the ability to attract more users with zero cost-of-entry, while generating potentially limitless revenue via consumable items. Both of these factors have made freemium a sustainable and popular approach, especially in the gaming market, where in-app purchases (IAP) account for 72% of App Store revenue.
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However, freemium games are controversial because they entice players to spend money. Many games, for example, create absurdly long wait times unless the user forks over some credits. Others ensure that useful game tools are impossible to get without laying down some cash. Publishers of freemium games have even called on psychologists to help spark a greater desire for users to spend.
Freemium games convert players into paying customers at wildly varying -- but ultimately low -- rates. According to analytics firm Flurry, these rates range anywhere from 0.5% to 6%. However, intense users spend about $14 on the average freemium transaction. The ultimate goal of any freemium game developer is to attract these “whale” gamers in addition to lesser spenders.
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In Defense of Freemium
Games with low costs of entry have had a long, proud history. For instance, traditional arcade games only allow players to participate for so long before requiring more money, with no hypothetical payment ceiling. Does that make arcade games any less legitimate than social games? What is the difference between a game that is designed to encourage players to put more coins in a machine and a social game that uses psychological techniques to encourage people to pay?
In fact, some games work much better when real-world money is at stake. A beat 'em up title like Final Fight is more entertaining when a player’s dollar must get him as far as possible. Take out the payment model from some freemium games (social games included), and not only would the entertainment value dip -- the profitability would suffer too.
More Ethical Freemium Models
The mobile gaming industry, comprised of many smaller studios and independent developers, is pushing for ethical freemium games. One of the best examples is NimbleBit's Tiny Tower. According to Ian Marsh of NimbleBit, "We take a very simple approach in designing fair free-to-play games, which includes making everything in the game available without paying for it, and balancing the game around the free player. Tiny Tower was beta tested and balanced without the inclusion of [in-app purchases] to ensure that it was compelling as a free experience. I think the one thing to avoid is making IAP a requirement for a fun experience."
This strategy has worked out well for the two-man development studio. While exact player numbers and sales are difficult to ascertain, Tiny Tower has attracted over 2 million Game Center players alone. Furthermore, NimbleBit’s various iOS titles have reportedly made millions of dollars over the past three years, all of which are now free to download.
In fact, this business model has piqued the interest of many long-time iOS developers. Bryan Duke of Acceleroto has released both premium titles and ad-supported titles. Duke is currently working on Rush City, planned as a freemium game. He is already familiar with the free game business, having released the ad-supported Air Hockey Gold, which Duke says has been downloaded millions of times, and gets 500,000 monthly banner clicks that entice users to upgrade to the paid version.
Still, Rush City will be Acceleroto's first true freemium game. "The balance of what IAP is and how it integrates into gameplay is something we’re spending a lot of time on,” says Duke. “I want Rush City to be completely playable and fun, while not sacrificing any of that because of the ads or IAP.”
As the gaming industry evolves, it is important to not to fear new frontiers. It’s possible for game developers to care about earning money while also making fun games. Duke adds, "Freemium games are not inherently bad. Some companies have stooped pretty low to generate revenue in their free titles. However, some companies have done remarkable jobs at freemium titles…For us, we’ll continue to work on ways to make our players happy."
Freemium Games Are Evolving
David Marsh of NimbleBit says that games will change as they always have. "Arcade games branched out and evolved from simple quarter munchers,” he says. “I think the same thing will happen with freemium games as they mature and the competition centers more around who can come up with new and interesting ideas, rather than who can collect money the most efficiently."
New freemium games come out every week in today’s quickly evolving mobile gaming market. This is a business model that, for the foreseeable future, will impact the games we all play. Therefore, game players need to go out and support games that are fair as well as fun to play. Players passionate about game sustainability must vote with their wallets as well as their words.
What are your thoughts on the rise of freemium games? Do you fear they will negatively impact the current way we play? Or will we see new types of games built around this business model? Let us know in the comments.
This story originally published on Mashable here.