Email: Free to play model

A friend of mine asked if you could elaborate on why the industry new obsession, the free to play model is flawed

He reads the blog too, but can’t write as well in english

Let’s start with the obsession for new models. You would think by reading the Game Industry that business revolves around inventing new business models all day. But it isn’t. Business revolves around making customers, making sales. Stores are still using their same business model. Their fight is to make customers. So they introduce a new product, have sales, whatever to get more customers.

It is very difficult to create new business models. And there is often very little reason to do so. Here is an example of why a new business model would be needed. Let us say you rely on advertising. But you are saying things people find ‘controversial’ either from a political, cultural, or whatever nature. What will definitely occur is that the ‘haters’ will go after your advertisers. Your advertisers will be operating on countless places. When they hear ‘complaints’, they don’t want to deal with that. So they drop you. This is why people who use general advertising never say anything interesting. You either have to water down the content (make it so uninteresting no one could passionately hate it) or shut down your operation. And this defeats the ‘why’ you were in the business in the first place.

The solution to this is Direct Line Marketing. You would have a direct line to the product you are advertising. You would ensure that by them being your advertiser, you will specifically increase their business. And since you can point to yourself as the reason for their sales going up, the advertiser will not drop you no matter if Hell comes at them. If I made this website a commercial operation, I would use Direct Line Marketing. So if someone got REALLY angry about something I said about Zelda (or something else) and decided to inform my advertisers that ‘Malstrom eats kittens!’, the advertisers would laugh at the person because Malstrom would be directly responsible for their increase in cashflow. This is why you would need to change a business model.

Most of the time spent is a business trying to make new customers. This battle never ends. The business model is very important when starting up a business, of course. But once it is operational and working, you don’t change business models like a person changes his shirt. That’s just crazy.

The Game Industry is obsessed with new business models because they cannot create new customers. So they think a magical new business model will solve their problems. It won’t. The Game Industry thinks the ‘world is changing’ and, therefore, the business model must change with it. And they think this is the problem with their games not selling. But I say the problem is with the product, not with the business model. Their games just suck.

The Internet has not ‘changed’ things. All the Internet has done is globalized the marketplace. I can buy a game from Europe (say, Minecraft) instead of buying a game in my local town. There is more competition than ever.

The reason why the Free 2 Play model won’t work is because it is not new. The shareware phenomenon and even freeware utilized mail to get around retailers. Free 2 Play is exactly the same but using the Internet. Most of the shareware game companies died out. But a few of them were extremely successful and grew up to become movers and shakers in retail. These companies include Epic Megagames and id Software.

The American newspaper industry tried this business model, and it was the blow that broke the industry’s back. Newspapers began to give their content away for free. They assumed this would attract infinite eyes due to the Internet, and they would make money by subscribers or people who want other services. The New York Times tried this model and the company would have folded had it not been the intervention of a major Mexican investor to save the company. Giving away content for free doesn’t work. While a few early sites might have gotten some money, the value of the content dropped. People began to expect they didn’t have to pay for news anymore. Lately, many news sites have realized this mistake and trying to reverse it. The only ones that have been successful are the business news sites (people will pay for business news, but not ‘beltway gossip’ from politician obsessed journalists).

All the rage for Free 2 Play model came from the rise of Korean MMOs and other Asian online games. While WoW succeeded because of retail, why did these Asian games have to go Free 2 Play or a similar model? It is because gaming has very low value in South Korea. Playing a video game is seen as wasting one’s time and a distraction from studies. ‘Gamers’ are not looked on there well. The market also isn’t growing. As competition from China and the West entered South Korea, NCSoft could only decline. This is totally the opposite of how retail worked in the West. When a few games do well at retail, other competitors would enter and become successful. The market grew.

I suspect the reason why Free to Play has any value, whatsoever, is because of the existing retail games. When everyone begins to think every game should be free, the retail market could permanently end. But then Free to Play loses its value. If every game is ‘free’, none of it seems like a bargain. And since there is little to no money fueling these games, these games cannot do much to create value for themselves.

Free to Play isn’t sustainable. And it relies on parasitism off the “Paid to Play” model. There is a reason why Iwata used GDC 2011 to talk specifically about this subject and warn everyone about it.

Another reason why the “Free to Play” model is such the rage with the Game Industry is because they consist of dorks who believe they are ‘technology pioneers’ because they walk around with an iPhone, Android, or iPad. They see these free apps, hear some success stories, and think, “Oh golly! This is the future!” And they are so wrong.

Here is a good story written by an app maker who stopped giving out the free version only to watch his sales increase. It’s worth reading.

Here is a quote:

Instapaper Free always had worse reviews in iTunes than the paid app. Part of this is that the paid app was better, of course, but a lot of the Free reviews were completely unreasonable.

Only people who buy the paid app — and therefore have no problem paying $5 for an app — can post reviews for it. That filters out a lot of the sorts of customers who will leave unreasonable, incomprehensible, or inflammatory reviews. (It also filters out many people likely to need a lot of support.)

I don’t need every customer. I’m primarily in the business of selling a product for money. How much effort do I really want to devote to satisfying people who are unable or extremely unlikely to pay for anything?

(This is also a major reason why I have no plans to enter the Android market.)

He is wrong in saying in calling people who got the ‘free version’ as ‘customers’. They are not customers. They might be users, but they are not customers.

Free 2 Play is operating on an incorrect assumption that ‘free’ will be most accessible at spreading notice of the software out. This is not true. You do not want people who refuse to buy things using your software. This means they start off having no value of it. When people pay for a product, they are already investing in it a little. People take products more seriously if they paid for them.

Let me ask you a question. Why hasn’t emulation of old school games ended the gaming market? What happens when someone downloads an emulator and thousands of roms? The person grows disinterested and stops playing altogether. These are some of the best games ever made, yet the person will lose value in them. It was because the person didn’t invest any of his money into it.

The mission is to create as many customers as possible, not to create as many users as possible. You don’t want people using your product who do not value it. You do not want people who are unable to risk a few dollars for your game.

Free 2 Play cannot succeed because when people do not pay money, they have no value of the product. And as the perspective of value plummets, so does any potential income from the ‘virtual hats’ or whatever the Free Game ‘sells’.