US free-to-play audience outnumbers pay-to-play 6 to 1, but does it pay to switch?
The emergence of free-to-play (F2P) as a viable revenue model for the online games industry has practically been talked to death. Nonetheless, both small and large publisher are still looking for a definitive answer to the question of whether it makes sense to switch to free-to-play. In response to some of our customers, we prepared an analysis of the benefits and pitfalls of adopting F2P.
The very public IPO and dealings of games publisher Zynga, amongst others, has brought this segment to the forefront. It’s a stark contrast to the past in which pay-to-play (P2P) and subscription games like World of Warcraft held the spotlight for gamers and finance-minded industry players. Since then well-known titles—including Star Wars: The Old Republic, Dungeons & Dragons Online, Lord of the Rings Online, Aion, and Age of Conan—have switched to P2P after initially launching in the P2P realm. The question these titles raise is whether or not it pays to switch to free-to-play.
The last five years have seen a significant upset to the model of subscription games, with audiences of P2P MMO titles remaining steady or declining, while the number of F2P game users has exploded. If you were to look at the growth of the audience alone, the market for F2P games is substantially larger than that for pay-to-play. Six times larger, in fact.
Subscription-based MMOs have been on a decline in the US, dropping from 8.5MM in December 2009 to 6.7MM in October 2012. F2P, on the other hand, has been growing from 7.5MM in 2007 to 39.5MM in October 2012.
So, yes, it would appear that F2P may be a viable revenue model, partly because of the large number of gamers it attracts. But traffic alone is not a definitive measure of success. Overall spending may follow a very different trend depending on a game’s life cycle, player base and genre.
The good news is that in 2012, F2P MMOs made more than their P2P counterparts, capturing the majority of the MMO US market’s revenue. The tricky part lies in how to capture and replicate this success.