The “Freemium” Game sales model? Lipstick on the same old pig?

When I first sat down to write this article I was a little lost initially as to how to attack it. You see I am not convinced that the “Freemium” model is actually the “next big thing” that the blog-o-sphere is hyping it up to be. Certainly a large number of apps are being shifted under that banner. But then a lot of apps always were being promoted with free demos in all spheres of gaming long before the AppStore came along. It’s seems that it’s more a rebranding of what we’ve seen already for quite some time. Just to be clear, this is my own personal take on this subject, and this article has already been through a couple of revisions where my kindly editor has smoothed some of the sharp edges and pointed out some aspects of the subject I could have looked at from other angles.

Ngmoco certaily seems to think “Freemium” is the future. And it’s hard to argue with their popularity in the AppStore charts. In November of 2009 their FPS shooter “Eliminate Pro” had already been downloaded 500,000 times, at the staggering rate of 25,000 copies an hour. These figures placed it solidly at the top of the free app chart in iTunes.

More recently they purchased longtime Mac / iPhone indie publisher “Freeverse” with venture capital money they raised with Institutional Venture Partners, and existing shareholders Kleiner Perkins, Norwest Venture Parters, and Maples Investments. Currently Freeverse’s catalog is all paid apps, but the plan apparently is to move them over to the free-to-play model also.

To date Ngmoco’s installed base of it’s most popular apps (TouchPets and Eliminate) tops 9 million copies “downloaded”, with hundreds of thousands of “plays” each day. Ngmoco are also taking a pop at the likes of Scoreloop, OpenFeint and Agon with their own entry into the social gaming network race, Plus+.

Young (Ngmoco’s CEO) is pushing to roll out more and more new games in a virtual avalanche, and plans to open up an SDK to their Plus+ social gaming system so that other developers can easily tap into it. The Plus+ system can manage virtual goods payments, player-to-player messaging, and other social aspects of iPhone games. Effectively taking on Urban AirShip as well as Scoreloop, OpenFeint and all the rest, all at the same time, in one all encompasing package. On top of that they are planning on bundling an internet based multiplayer network in with all these other features at some point in the future. At the moment that aspect of their network seems to be limited to their own creations though. I have not been able to get a timeline from them for general availability when I have made enquiries.

These figures, acquisitions and developments are hard to discount when asking yourself about Ngmoco’s future, and the success of the “Freemium” app model. But how much is to do with these games being free at the start? And is this Apple’s success or Ngmoco’s marketing we’re seeing succeed, rather than the “Freemium” model?

How is giving people the opportunity to try before they buy any different from the current system we have in premium console games? On XBox live or PlayStation Network people download a demo, and then decide whether to buy the retail item all of the time. The whole process is simply not integrated seamlessly yet as it is in iTunes, but they are getting there. Virtually every serious game purchase decision I have made personally in the last several years has been made after trying a free demo of a game. The real change that seems to be creeping into games these days is that we get less at purchase / download time and augment that with a cash stream trickle feeding the publisher for more content. All things that the big game publishers have been pushing harder and harder recently, and seems to have accelerated in iTunes since the advent of OS 3.0 on the iPhone and Apple introducing “In App Purchase”. Steve Jobs waxed lyrical about all this in his latest Keynote address stating that iTunes has around a bazillion people’s credit cards on file for buying content right now.

Scrolling through the reviews on the AppStore for some of the higher profile “Freemium” titles it seems that a fairly considerable percentage of people are not impressed by the basic “free” app they get, and the rest simply upgrade / buy app content because they like the game anyway, or get hooked. A great example is Eliminate Pro which severely limits replays in the free version, necessitating stumping up hard cash to buy more effective playing time. It’s like the “CoinOp” era all over again from where I am sitting.

To date Ngmoco’s most successful Freemium titles are in areas where games are almost guaranteed to succeed. One is the Sims style game TouchPets and the other is not only the first, but also the only multiplayer FPS on the iPhone : Eliminate Pro.
With or without a free download these games would garner quite a lot of attention anyway. So what are Ngmoco gaining from giving the title away initially? It seems to me they are quite able to market their games effectively – something which is harder for smaller developers. It’s also apparent that they have fairly high production quality when it comes to game websites, game front ends, and the overall look and feel of their products. So they would seem to be able to fair reasonably well if they simply sold their games at full price. After all they have enough backing and infrastructure to run their own global multiplayer network for “hundreds of thousands” of players. Not an insignificant undertaking!

(Yesterday I wrote about an interesting App Store pricing model experiment carried out by Indie Developer Tommy Refenes. Although an isolated unscientific study, it’s worth reading the account to get where I am coming from with this whole App Store pricing problem.) NOT PUBLISHED YET.

There is another important aspect to this method of marketing to consider. It’s a model very strongly based on the social aspect of gaming, and a certain amount of addiction to competition (passive or active), rather than the fact that something is free. It’s certainly true that by offering a free glimpse into every game you make you have a better chance of selling it to people than you do from static screen shots, or even gameplay videos. This is assuming that the entertainment value grasps the user in that trial period. But it can also canibalise your paid app sales. There is an interesting article on that here (GDC: Backflip’s Farrior On iPhone Ad Sales, Free Versions) where Julia Farrior, CEO of Backflip Studios talks about some of their hits and misses in the App Store.

I mentioned Scoreloop earlier, who’s entire business model is venture capital funded and free to Devs. Likewise with OpenFeint and the other contenders for the gaming social network crown. The difference is these startups don’t publish games, but provide the social networking back end for app developers to leverage. Something that OpenFeint and Scoreloop may have going for them is that they are more often than not part of a product that a gamer has already decided to buy. So up-selling app content is not actually part of their business model. Scoreloop, for example, very much rely on selling their own “coins” to players so that gamers can wager against each other. Gambling on their own skill, and against that of others, to amass more virtual wealth.

Let’s take a look at Eliminate Pro again. It’s a good example of what the “freemium” model is all about. Simply put the free game provides a limited amount of something. This “something” (energy in Eliminate’s case) is required in order for you to compete effectively, and then progress in the game’s hierarchy. You have two options: Put up with an arguably crippled experience after a very short introduction period, or pay some cash to compete on a level playing field – or compete at all! The great thing from the developers perspective is that they get much much more exposure with free games that are immediately accessible to gamers. The free versions of games I have been involved with are downloaded between 10 and 50 times more often than paid items. One of the older iPhone titles I worked on sells very little now, but still gets 20 or 30 free downloads a day, every day, with little or no promotion. It’s certainly a hard fact that if you want to at least get some market penetration, and a chance of being discovered in the burgeoning list of entertainment titles in the AppStore, then you need to give a free or “Lite” version of your title away. That is unless you have the marketing power of EA, or the IP of Ubisoft or RockStar. Then again you could just write a Zombie game!! I jest.

A cynical person could liken the Eliminate Pro or TouchPets model to that employed by drug dealers, or more charitably similar to that of World of Warcraft, or paintball even. First you get them hooked, and then you keep nibbling at them for a dollar here, 5 dollars there for ammo or consumables of some sort.. Simply put, this is how it works: Subscription. You want some more energy so you can go shooting people then it’s gonna cost you between $1.99 and amazingly $39.99 depending on how much “energy” or “dog chow” you want for your battle suit or virtual pet, respectively.

Having played Eliminate Pro I can honestly say the control system needs work (and many players I have spoken to repeat this complaint), but it’s eye catching and well presented. It seems to be predominantly populated with inexperienced players, which is explained by the developer chat I reported on earlier this week with the Ngmoco team, where they discuss their matchmaking efforts : (Ngmoco Gives Interesting Talk on How Eliminate Was Built | GDC 2010) However, I found I was in rooms with lots of people scraping along walls most of the time, and fragging people was somewhat satisfying simply because it was so easy! I seemed to do less “wall scraping” than my competitors at times, that’s all I guess! I am forced to wonder what the turnover of new players that never come back is. And unless you are paying you are not getting much for free.. Although if a player simply waits a fixed amount of time their energy will trickle fill again, and after a period of time they can play again for free.. But overall a lot of people find this frustrating as these kinds of comments bear out..

“This game is great. The graphics are good, frame-rate is good, gameplay is good, upgrades are good. Although, I must mention the controls don’t really work until you buy the first unlock-able weapon.”

“They really nickle and dime you for this.”

“But 4 hours to recharge for enough energy for 1 game is insane.”

After reading these comments I wondered what percentage of people who downloaded these free titles actually enjoyed their “freemium” experience, or simply left frustrated, as simply another statistic for marketing purposes. It seems that overall consumer views are split on these titles. If you look at the star rating there are a lot of high stars and a lot of low stars, very few in the middle! Which is interesting. And even the positive reviews for Eliminate (outside of the new main stream mobile gaming media) all state that it’s not really a good game *unless* you are paying for it. Again, and again.

It’s also worth noting that there are ads running on the front page of these games now. Something which is also available to any developer via AdMob and other similar services. Are Ngmoco still experimenting with where the bulk of their revenue will come from when the venture capital money runs out?

Back in the heyday of arcade games you fed 10p / 25c into a slot to keep playing. Now it seems that the plan is that you should attach a credit card to the AppStore and trickle feed your play habit that way. From a cash flow perspective this is very attractive. But as someone who enjoys his craft and is certainly not an up and coming Bill Gates with aspirations for world domination I am left feeling a little empty inside by this business model.

There are other titles out there that work on similar principals. “Baseball Slugger”, which although a paid game, offers you the option to either buy special packs for your player for cash or earn more “gold balls” to unlock those same upgrades. It’s a little similar to how Scoreloops coins work. This is a skill based model. Those players that don’t want to buy in have the option to progress based purely on skill, and at the same time I am guessing drive some other less “skillfull” players to buy upgrades to keep up. Of course I am sure many people simply buy the upgrades anyway. But at least the choice is there, and there is the satisfaction that keen players can get from having all the extras without having paid a dime!

Another slightly different example of exploiting this free to play model is our Editor (with obviously way too much free time) who takes great delight in playing “Skies of Glory” and beating players who have bought all the upgrades (“Cool bombs and a fancy plane worth $9.99″ – as he puts it) with his basic aircraft “with no upgrades at all”!

Overall these two examples, and to be fair, to a small degree Eliminate (as more skilful players can hang onto more energy each game and play for longer before they are depleted and benched), offer something for nothing without driving the need for players to pay for something. But the bottom line is they are all mini-systems designed to get the majority of players, either through friend envy, social pressure or sheer laziness, to pay a subscription of some kind to continue playing. Those top tier players who get it all for free are the constantly moving target that drives the less skilful to pay up. They are an important integral part of the overall business model. It kind of reminds me of the major players in the new SciFi (ScyFy – ugh) TV series “Caprica”, who play in the “one death and you’re out forever” VR Caprica world. Now that’s a gaming model I’d like – and one I’d pay to play in. But I digress…

“Tap Tap Revenge” is one of the standouts in this growing bunch of initially free to play apps. They provide a large number of songs with the free version, and do not seem to be pushing you to need to upgrade simply because base product is very satisfying. And yet they still make a lot of money. Part of that is they are now an established brand. But part of it is also that they provide a competitively priced, high quality product that people enjoy and want more of. Perhaps they see a friend with a cool avatar. Or perhaps they just want more variety. But either way it’s really their choice to upgrade, and they really don’t need to in order to be competitive, or to advance through any score table, or enjoy the game. In my opinion there is something to be learned there.

Now, I am not saying we shouldn’t make money from our software. Far from it. I write games myself, because I love games. I also need to eat though.

What concerns me is the way both mobile gaming and home gaming is slowly moving towards a rental model. Companies increasingly aim to push out as many products as they can in a year, all fairly formulaic, and now it seems with “Project 10$” from EA, and something similar from Sony (except twice the price!), that the idea is to turn games into revenue streams rather than outright purchases. Including when they are sold second hand. And all this by exerting more and more control over content in terms of the access to it, and the volume / timespan of that access.

With the “Freemium” App model consumers may be getting something free initially, but it’s little more than an advert / demo they would get for free anyway back in the day with more traditional models.

One individual reviewer put it very well with regards to another “freemium” title: “I’d rather pay $10.00 now and play as much as I want, than pay $1.00 every day to play.” If someone is paying a $1.00 a day to play it’s very simple maths to work out how much they might pay in a month even if they only play every other day. When compared to a one time sticker price of $10.00 (or more often $1.99) in the AppStore this starts to make real sense from a financial perspective for a publisher.

What worries me is that we are looking at a lot of energy and development time being put into a very fast moving market for the next great marketing opportunity, to sell more credits, and hook more people. Rather than crafting quality challenging and enthralling experiences for players which have some shelf life for the developers. But hey, if that’s what the market wants who am I to argue. My concern is that the market knows no better simply because they are not getting offered anything different going forward.

From a small Developers perspective keeping up with this market you are either going to have to do a lot of work to setup a system like this for yourself with server support, and lay out quite a lot of cash on bandwidth and so on to service a successful “Freemium” model. Or you are going to have to sign up with the likes of Ngmoco, OpenFeint or Scoreloop. I don’t see Ngmoco providing their networked multiplayer for free (but I’d love to be proved wrong). I also wonder how long OpenFeint and Scoreloop will continue as they are before they have to charge in some way – despite what they say to the contrary. In any case (as a developer) your future, and your potential fortune is in their hands to some degree if you go down that route. My only advice if you are leaning that way is to pick your partner carefully. Scoreloop and OpenFeint have a more focussed and mature business plan, and are in a different market than Ngmoco, as I’ve already pointed out.

Ngmoco are courting developers right now with possible publishing deals. Which is great. Lots of opportunities. But I am not convinced that this is really the creative freedom I am looking for as an Indie myself.

An alternative to all this is to craft a quality standalone game and charge a fair price for it. But as we all know it’s very hard to get exposure in the App Market these days, especially with “the race to the bottom” in pricing.

Which brings us back full circle, it seems, to the free demo, paid upgrade model – which Apple introduced with StoreKit in OS3.0. And other bigger publishers on other platforms have been doing for a while too. This is something all iPhone developers can do quite simply themselves with StoreKit, and a “Lite” version of their App which can offer in game purchases or full upgrades as part of it’s features. Or as a set of standalone “Lite” and “Premium” titles.

So have we really moved that far forward from then? I don’t think so. I just think we’ve put some lipstick on the same old pig.

Indies still have to work hard. Big venture capital startups and major publishers have the clout and existing IP to get market awareness. We all have the opportunity to produce both free and premium titles and sell them ourselves, or go with a publisher. What everyone really needs to focus on is producing quality products that people want and then getting the best exposure and marketing possible to share their idea with the world.

Disclosure : Where I work we use Scoreloop in our titles, and we too sometimes wonder how they make any money! But overall in our experience they are the most approachable and enthusiastic company for Devs and gamers alike in this industry.

Services Referenced in this article:

Social Networked Gaming Services with SDKS and various levels of Push notifications and in App Purchase.
Scoreloop : http://www.scoreloop.com/
OpenFeint : http://www.openfeint.com/

Promises Social Networking and possibly global networked play. But SDK pending.
Plus+ : http://plusplus.com/

Push Notifications and in App Purchase system. (Limited free model and premium model)
Urban Airship : http://urbanairship.com/

Monetising games with in game advertising.
AdMob : http://www.admob.com/

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Stephen NorthcottThe “Freemium” Game sales model? Lipstick on the same old pig?

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