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A blog from Chieftopia - the rise of free-to-play (F2P)

16.05.22 06:22 PM Comment(s)

What is free-to-play (F2P)?

Look at your phone. Look at the games that you installed. How many of these are paid for with real money? Chances are that you did not pay anything at all for the games you play. Well, at least not consciously. Of course, you did pay something: you spent minutes, maybe even hours, looking at ads. Ads you need to watch to continue what you did (or even to start whatever you intended to do).

Basically, you pay with your time, or better, your attention. Is the free-to-play business model all about you watching ads? Not really. Perhaps it was like this in the early stages of mobile games. However, it soon evolved into a model where a free version is playable for everyone. They let you play the game for free until a certain level or area (you need to pay if you want to continue). Or they give a handicap to free players in the form of time penalties (for instance, slower leveling or recharging), functionality penalties (partly unavailable skill trees), or convenience penalties (smaller bags, no instant travel). All this friction is geared towards stimulating you, the free player, to pay and remove these disadvantages.

Today, most mobile games use this model in conjunction with ads. Just a few games show only ads when you choose to watch these. Usually in return for a minor upgrade to replenish your energy or reduce your cooldown (I like Crazy Defense Heroes for this!).

Of course, this is a delicate balance: if you put too much friction in the game, nobody will pay or even play. If you put too less friction in the game, nobody will feel the urge to pay. And you will run out of business.

F2P in traditional games

Inspired by the success of mobile games, PC games also ventured into F2P. Games like RuneScape experimented with ads but later added a subscription model layer. In a way, they were one of the first freemium games: free with the option to upgrade to premium.

Due to the increased availability of broadband internet, many so-called MMOs (massively multiplayer online games) gained popularity: PlanetScape, EVE Online, and World of Warcraft, to name a few. They all had a subscription model: you pay to play. However, in their slipstream, F2P MMOs also gained traction. These were mainly targeted at kids (1) and were usually seen as crappy, grindy games (Conquer Online, anyone?). Later, triple-A games went in this direction as well: Lord of the Rings Online, Guildwars2, and Star Wars The Old Republic to name a few. They transitioned from a subscription-based model to a freemium model.

Then a new generation of games emerged where F2P was built in from the start: games like League of Legends and DOTA2.

Today, the top 3 of the most played games look like this (2):

  1. PUBG: Battlegrounds with a staggering number of 1,2 billion players.
  2. Crossfire with 1 billion players.
  3. Dungeon Fighter Online with 850 million players.

And surprise, surprise: all these games are F2P.

The need to change?

Why did the business model change? What is the problem with buying a game and play for free forever?

Well, the freemium model has a couple of huge benefits. First and foremost, it is very lucrative. As with almost everything in our world, money is the main stimulus. Compared with the traditional model, it appears that F2P brings in more money. This raises the question: why? Why does it bring in more money?

Part of this answer lies in another big advantage of F2P: it has a very low barrier of entry. At a zero price point, the only cost is bandwidth to download the game and opportunity cost (time you spend here cannot be spent elsewhere). This means that there is almost no reason to not try a game. Of course, the game must appeal, and not every game genre does. Still, the fact that a game is free to try, caused an increase in the player base. Valve boss Gabe Newell said Team Fortress 2’s user base had increased by a factor of five since it adopted the free-to-play model. (3)

The other part of the answer lies in the behavior of the players. It seems that only a small percentage of the players spend money. But this is enough to sustain the game! Not all players need to convert into paying players. On the contrary, in some games, this only is a fraction of the player base.

Interestingly, some of these paying players spend a lot. These big spenders pay much more than they would have paid on a box sale only. This small group sponsors the much larger group of free players. The people who really like the game will keep your game afloat.

Let’s use an example to demonstrate this point. The players who spend money carry the cost of all players. Every paying player (premium) needs to carry 100 non-paying players (free) to break even. The premium players need to spend an average of 10 USD. Now, when you look into the distribution of the premium players’ spending, you will see that a small part is spending over 100 USD. And some even more than 250 USD! It is this mechanism that makes the F2P model viable and even lucrative for successful games. There is no limitation for the gamers that love your game. Instead of 60 USD, they now can spend more than 250 USD!

So, to summarize the success of F2P: it allows more people to try your game for free. This increases the user base and thus the chance to attract players who spend as much as they want.

Can every game go F2P and reap the benefits? No, fortunately not. We would end up with a lot of crappy games that want to get rich quickly. Oh, wait, are we in this situation already :)? What do you think?

In my next post, I’ll dive into this: what does a game need to succeed?

This post is from Chieftopia's personal blog here.