Free games

At TomorrowToday, we are great fans of games, and especially of the learnings we can get from games. We are also keen observers of the gaming industry, which often picks up on shifting values and economic models before other industries do (compare them, for example, to the music industry – especially on the issue of pricing I’m about to talk about!).

Here is a small feature from the latest Economist magazine on a new financial model for games. Give them away for free!

FOR millions of East Asians, online gaming is not so much a hobby as a way of life. “Massively multiplayer” online games such as “Legend of Mir 3” and “MapleStory” have legions of devoted fans who spend an alarming proportion of their waking hours sitting in front of their PCs, at home or in internet cafés, doing battle with elves, wizards and mythological beasts. Some players take their parallel gaming lives very seriously: one man murdered a friend in a dispute over a stolen virtual sword (GC: this happened a few years ago, and is the only known extreme incident – but it is still much quoted).

Many of these games rely on a business model that is different from the way the video-games industry works in the West. Rather than selling games as shrink-wrapped retail products which can then be played on a PC or games console, the Asian industry often gives away the software as a free download and lets users play for nothing. Revenue comes instead from small payments made by more avid players to buy extras for their in-game characters, from weapons to haircuts. In this way, a minority of paying customers subsidise the game for everyone else.

Now this model is being applied outside Asia. Electronic Arts (EA), a giant American video-games publisher, is preparing to release “Battlefield Heroes” (pictured), an online combat game with a slapstick sense of humour. It will be a free download but will, the company hopes, make money from both in-game advertising and the sale of character upgrades. Sean Decker of DICE, the EA subsidiary responsible for the game, says the game’s website is already attracting 60,000 visits per day, which bodes well for its launch later this summer.

PlayFirst, a publisher of “casual” games based in San Francisco, is already making a success of the micropayment model. “Diner Dash: Hometown Hero”, a game that involves running a chain of restaurants, allows players to buy extra levels, clothing and decorations online. John Welch, PlayFirst’s boss, says sales of such items now account for 10% of the company’s revenue.

Micropayments are already proving successful in the field of social networking, notes Piers Harding-Rolls of Screen Digest, a consultancy. He points out that Habbo—a self-styled “hangout for teens” that takes the form of a virtual hotel, and operates in 31 countries—generates the lion’s share of its revenue ($66m last year) from sales of virtual clothing, furniture and accessories.

For games, the Asian model has many benefits. It lowers the barrier to entry for new players by allowing people to play games without having to pay anything. And since the game’s software is usually given away, there is no need to worry about piracy—indeed, the more a game is copied and passed around, the better. Given the huge cost of developing the most advanced video games, however, the new model seems unlikely to push aside the traditional model of selling games on disc (or as paid downloads) any time soon. But as gaming reaches out to new audiences, there may be more scope for new business models based on advertising and micropayments.

Source: The Economist, 26 June 2008

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