In the interest of playing devil's advocate, I thought I'd throw out 10 reasons why free to play might be slower to succeed in the Western world as it has been in Asia.
While I don't necessarily believe all of these will inhibit F2P's growth, one of the slides in my GDC presentation this year is to do with the challenges F2P faces - so this should help fulfill that requirement.
1. Virtual Property "Ownership"
The term 'virtual' may not have a strict legal interpretation, but if anything it means that the thing being described is NOT whatever comes after the word 'virtual.
- Ginsu Yoong, Second Life’s legal counsel, Linden v Bragg
Despite virtual property's ill-defined legal status, developers have had no qualms about starting byzantine in-game economies driven by the exchange of real money for virtual land, clothing, furniture and much more.
Some developers, like GoPets CEO Eric Bethke, have attempted to get out in front of the virtual property legal issue by defining their own "Avatar Bill of Rights." But most of us have not been as proactive and instead seem content to leave it up to the courts to decide how to define and deal with our users' virtual property.
As precedents regarding virtual ownership are set, the growth of some F2P products may be curtailed as the legal burden of dispensing virtual property increases.
2. Slow Broadband
On the issue of net speed, there remains a huge disparity between North America's broadband ISPs and Korea's military-grade internet provision.
The net effect is that free to play games like Maple Story can take 1-3 hours or more to download in North America, while Korea's 45mbps network cuts the same download to a paltry 10 minutes or less.
It’s fair to say that we won’t soon be getting such high download speeds - but the North American market might have already found a way around the issue. With the launch of streaming game services like InstantAction and the proliferation of Flash as a full-blown development platform, downloading entire game clients become less and less the norm.
3. Poor Advertising Strategies
Some products in the F2P sector have come to rely heavily on advertiser support in order to keep their offerings free for the majority of players.
A recent OMMA article that claims advertisers are taking the wrong approach when handling virtual worlds. And as the populations of virtual worlds appear to be prematurely plateauing, advertisers may be starting to sweat.
But there is hope if advertisers change their strategies to suit the unique challenges virtual worlds present. As Worlds In Motion put it:
...themed events, branded avatar clothing, and representative personality appearances are finding success and opportunity in worlds like There, Habbo and vSide.
4. MMO Overload
From Maple Story to Silkroad Online, there is no shortage of MMOs in the free to play space. In the same vein, there is an abundance of virtual worlds such as Second Life or Kaneva. It seems as though the vast majority of new free to play game since 2005 have been virtual worlds or MMOs.
Perhaps it’s the very reason that these games have proliferated in the free to play market; MMOs and virtual worlds are inherently more inclusive than an FPS. Still, it would be a shame to see the free to play space flounder due to constant reiteration of the same genres and themes, turning away players seeking a different experience.
Of course, games like Kwari are looking to change that, but it’s too early to tell just how well they will catch on.
5. Rising Development Costs
With more prominent developers announcing plans to take advantage of the free to play model, the days of games fueled by ramen noodles and nights in the basement could, once again, be history. EA's upcoming Battlefield Heroes is the latest big budget free to play game, signaling that the big publishers aren't content to sit back and let Far East imports eat their lunch.
If the consumer makes the jump from 2D to more advanced 3D graphics, it could mean the end of the visually rudimentary worlds and Flash-based free to play games as market leaders, making way for the mainstream big budget games.
6. Second Life Slowdown
Second Life is the Apple Newton of virtual worlds. It was here first, but isn't the best representation of the potential of virtual worlds. However, it still occupies a place in investors' minds - akin to a coal mine canary, warning of impending danger.
And while investors took note as Second Life soared to the top, they're noticing its decline as well (active user hours were down 5% in November). There is concern among some that Second Life's time might be up, and that’s not a good sign for potential investors in the free to play space.
7. Watered Down AdverWorlds
With their lower barrier to entry and great potential to spin money, an slew of less innovative products are beginning to hit the market. Hardest to ignore are adverworlds like Build-A-Bear, Rush Zone, BeBratz, BarbieGirls and their ilk - marketing spend thinly disguised as entertainment.
The consumer's willingness to pay money for virtual items in a world where their avatar is little more than a target for advertising will be tested by products like these.
8. Unsanctioned Secondary Markets
Then there’s the issue of gold farming. With websites like IGE operating independently of game developers and establishing secondary markets for game currency and items, it’s not just traditional MMOs that are being subjected to this kind of treatment anymore.
What’s worse, while gold farming might fuddle with World of Warcraft’s player-driven economy, some developers believe a secondary market allows players to skip the middleman altogether - a potentially fatal issue for free to play games who survive on item-based revenue streams.
The recent launch of publisher-sanctioned Live Gamer is a step in the right direction for devs and pubs looking to reclaim lost revenue.
9. Limited Payment Methods
We have hanging on our wall a user who sent a $5 bill in a $15 fedEx package.
- Craig Sherman, Gaia Online
While other territories enjoy a plethora of tailored-to-the-consumer payment methods, North America has embraced relatively few.
SMS would surely be nearly as popular a payment method here as it is in Europe if our carrier surcharges weren't in the range of 50% a transaction. Landlines - an expensive but very secure payment option in China - might also be popular with some services.
GoPets has 90 different payment systems worldwide, catering excellently to foreign payment preferences. Nonetheless, consumers still have trouble getting money into their favorite North American games.
10. Kids Only Games
The current offering of free to play games caters nearly exclusively to the under-25 set. An NPD study released last year showed that while 91% of online gaming among kids aged 2-17 is free to play, by the time those kids graduated high school, the boys had moved to sixty-dollar console games and the girls dropped out of gaming entirely.
In the core gaming arena, Nintendo has found a way to appeal to young and old alike. Free to play's appeal among adults relies on the proliferation of products that do a Nintendo-quality job of bridging the age gap or target older demographics only.
NCSoft the MMO giant has credits that include the massively popular Lineage, Lineage II, Guild Wars, City of Villains/Heroes and the upcoming Tabula Rasa. But Dungeon Runners, one of only two free-to-play games from NCsoft, is unlike most of their other products. DR is based on a tiered subscription model, where users can play for free, or opt to pay a monthly subscription ($4.95) to access upper level content.
Free To Play spent an hour with Dallas Snell, NCsoft's Director of Business Development, discussing Dungeon Runners, the free to play model and the future of NCsoft. Dallas has been a prominent figure in the games industry since 1983 having to contributed to over 20 titles during his time at Origin and EA. After a short sabbatical from gaming, Dallas returned to the industry in his current role based in Austin, Texas.
The earliest version of Dungeon Runners began as a different project entirely back in 2001, before being put on the back burner, where it remained until 2002 when it was dusted off to be a game titled Exarch. That too was eventually put to rest until Dungeon Runners was resurrected in its current incarnation about 18 months ago. Today the team consists of over a dozen internal employees with a heavy contingent of art outsourcing.
The decision to resurrect Dungeon Runners and make it a free to play game (versus a full retail MMO) came from NCsoft CEO Robert Garriott and Chris Chung, the former ArenaNet General Manager, who operated out of Korea at the time and therefore had early exposure to the free to play model. Chris is back in Austin now and looking to push NCSoft further into casual MMO development, replicating the success of Korean companies like Nexon.
There's been speculation that NCsoft chose subscriptions as the primary revenue model in Dungeon Runners due to a belief that North American players preferred that model to microtransactions. However, that was not the rationale for the subscription decision. Instead, Dungeon Runners' optional subscription fee was chosen simply because a microtransactional model wasn’t yet set up in the Dungeon Runners code base. To remedy that, the team is currently working on getting microtransactions running within Dungeon Runners before the game is launched in Korea.
Dallas made frequent mention of NCSoft's embrace of "Web 2.0" development philosophies. In particular, NCsoft's use of the free to play model, Dungeon Runners as a testing ground for future products and the company's strong commitment to reducing barriers to entry for all NCsoft products were all offered as proof of the company's Web 2.0-ness.
Dallas often referred to Dungeon Runners as an experiment, saying that although Dungeon Runners currently utilizes subscriptions, within a couple of months in-game advertising will become a part of DR. In fact, the ads are already in the world, but visible only to testers, NCsoft and Double Fusion (the in-game ad provider). F2P.biz was asked not to reveal how the ads will be implemented, but expect an announcement from NCsoft soon. If all goes well with the ad experiment, Dallas says NCSoft will consider the possibility of scrapping Dungeon Runners' subscription fee all together.
On the other hand, by their own account NCSoft is seeing higher than normal conversion rates with their current subscription set up, so perhaps Dallas won't be so quick to abandon it.
What are those great numbers?
Among active users (online within the last month), Dungeon Runners has a high free:paid ratio - i.e. there's a larger proportion of paid to free users than among most f2p games. Dallas cites Runescape with a 5:1 ratio (free to paid, online at any given time), and says that DR is hitting 3:1, or after content updates, as high as 2:1.
Additionally, NCsoft expected a monetization rate of 1-3%, but their numbers are reportedly "significantly higher" [Dallas declined to give a specific number]. Dallas claimed not to know the cause of the higher monetization rate, but one contributing factor may be that the large majority of in-game activities or items are available only to paid users. Dallas acknowledged this and went on to say that the dev team is strongly considering raising the ceiling for free users as currently only 1-2 hours of free play will result in players hitting the ceiling with respect to what they can get for free.
Further to NCSoft's recently announced plans to release free to play content on the Sony network, Dallas talked about his company's goal of becoming "device agnostic" in order to break down the segregation of gamers between platforms. NCsoft plans to build their own cross-platform community service, with friends lists, inter-game messaging, and other features similar to Xbox Live. NCsoft also intends to release desktop, facebook and mobile widgets to extend gamers' experience.
According to Dallas, NCSoft thinks of Dungeon Runners as a "MMO light" or a game that straddles the gap between casual and core gamers. In Dallas' opinion, the success of products like Runescape makes it likely NCSoft will develop even more accessible games - perhaps even browser-based - to further minimize the barriers to entry.
With 40+ data probes plugged into Dungeon Runners, NCsoft approaches the product as a testing ground for ideas to be built into other games. The probes measure everything from time played, rewards frequency, item usage, leveling curves and dozens of other useful metrics. Outside of the game, account-level metrics are tracked in a publisher module that will allow NCsoft to track and analyze a single player's activities across all their products.
In Dallas' eyes, retail may soon become "extinct" with digitally delivered gaming ruling the day. He spoke candidly about the struggles facing music and film and how games are uniquely structured to develop their own delivery solutions. To that end, products like Guild Wars and Dungeon Runners are blazing trails for NCsoft.
Finally, as already mentioned, a recurring theme from Dallas was his commitment to lowering the barrier to entry in all NCsoft products. As evidenced by their free to play experiment, NCSoft strategy is to grow their customer base as widely as possible, then monetize the largest possible proportion. Most flatteringly, Dallas said his officemates all had printouts of F2P's article, Top 10 Ways to Reduce Barriers to Entry, and were treating it as a white paper of sorts.
Thanks to Dallas Snell for his time and to Opal Lertutai, NCsoft PR, for setting us up.
From this post on NCsoft's Dev Corner, Richard Garriot discusses NCsoft's plan to build free to play console games.
PS3 NCsoft games would incorporate "traditional subscription models, micropayment systems and free-to-play games with membership options," according to the CEO.
Elsewhere in the post, Garriot indicates we might see the first NCsoft PlayStation 3 game by Christmas of next year (2008) - a product that sounds likely to be a re-use of one of their existing IPs, i.e. City of Heroes, Guild Wars or Dungeon Runners. He notes that original IP console games will take 2-3 years (i.e. 2009/2010).
Garriot also suggests that NCsoft intends to start a new studio to handle console development, but more likely is that the work will be farmed out to existing studios, not a new one.
"...We are also looking at specific projects that we may house in other studios. This includes our Austin offices or our other currently existing studios. Console game development won’t just be at one single location," he added.
Garriot hints that Xbox 360/XBLA is not NCsoft's first choice for their F2P products due to the restrictive nature of Microsoft's Live infrastructure. Aspects of my earlier post, The Economics of a Free To Play Console Game, may be relevant here as I examined the feasibility of doing a F2P XBLA game.