December 13, 2009

The Economy of FREE

FREE, 29 holiday song downloads on Amazon. You clicked.  I know you did.  It's ok, I'll wait for you to get Silent Night playing in the background before you come back to read this post.  FREE is hard to resist, especially with no strings attached.  FREE is also worth money, because out of the hundreds of people that download a FREE song, some will end up buying one.

Gamasutra has some hard numbers: 58% Of PlaySpan Users Buy Goods From Free-To-Play Games
And not only did free-to-play games see the highest purchase penetration among users, they also generated the most money on a per-user basis. The average user's expenditure on publisher-sold free-to-play digital goods over the course of 12 months was $75, compared to $60 for MMOs, and $50 for social network games.
F2P games, with micro transactions, serve all levels of investment from players. There is no barrier to entry because its free to play, increasing the potential audience. Those willing to spend very little, can still access the game, earning money from a market segment that the subscription model misses. Those willing to pay more are allowed to do so and are not capped at their monthly subscription cost. Both end up supporting the ability for free riders to hitch on at no cost.  A free rider being just another sales opportunity.

World of Warcraft has forever cemented the subscription model as valid. F2P games are quickly validating micro-transactions.  This is not an argument that F2P is better than the subscription model. It shows that the F2P model is working and that those people screaming about $10 horses are falling behind the times. Also, it shows that advertising can be done with the product, not flashy Mr T commercials (as epic as they are).  That's a win for the customer as we get a free game to play, no strings attached.