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Questioning the F2P vs P2P Argument — is it Really More Profitable?

Beau has a decent post up on Massively at the moment answering this question: Would he be more likely to play RIFT if it was F2P? As you might imagine, it brought the commentors out of the woodwork. Perhaps considering the penchant for vocal minorities to be, well, vocal, there’s a lot of RIFT hating and F2P loving going on over there (it -is- the Free For All column, after all). But to be quite honest, it’s been pretty interesting to read the conversations sprouting up. When you cut through the chaff, you see some pretty insightful points come up.

What really caught my attention though was Beau’s own comment:

From what I have read/heard and seen, even WoW is now getting a run for its money with a couple other FTP companies, as far as profit. Also, of the millions of customers of WoW’s, most do not play with a subscription. If you take WoW out of the pic, then FTPs are performing much better than subs.

I’m not sure that a lot of the western gaming audience is understanding that using a handful or recent Western MMO converts of the FTP payment model is really proof of anything. After all, they are too new and too few. Now, looking at the larger FTP market shows just how successful FTP is…which is why so many companies are going that way.

I’m not arguing Beau’s point here because frankly he’s right… as far as public perception goes. I have my questions about how valid those conclusions actually are and explained them in a reply.

I agree that F2P is successful and great in a lot of ways, but I’d have to question how much money we’re talking by game here. Take two games of similar population and community standing and see who’s making more. We can’t know that, of course, but when we take *single games* profitability, and put these things to equal standards of fair comparison, then I think we’ll get a better picture.

What concerns me is that the AAA industry is looking to F2P as a cash cow for the wrong reasons. F2P as an industry segment surely *does* make more than the sub-market (minus WoW) but there’s also way more games weighing down that F2P side. You also have higher worldwide adoption of the various cash shop models than you have subscriptions. The comparison must acknowledge that Western gamers are of a whole different mindset and background than Eastern gamers — which is why we’ve kept the sub model in the first place — and that whole hearted embracement of the cash shop model should be done with caution at best.

Will it be the wave of the future? Probably, and personally I think we’ll be better for it; subs are restrictive. Still, the income comparison we can be sure the big publishers reacting to is slanted towards a part of the world we’re not even a part of — and is only made possible by having many small games rather than a relative few big ones ala “AAA.”

I feel like when we’re talking about F2P vs. P2P, we always come to this conclusion that F2P is the more profitable option. But let me give you this analogy: You have a scale. On one side is Walmart with it’s multiple departments (which we can think of as our major AAA games). On the other you have everything else. Every. Thing. The mom and pop’s? Weighing it down. Competing chains? Weighing it down. The totally non-related but stores none-the-less? You guessed it, weighing it down. Guess which side makes more money at the end of the day?

My point is that saying F2P is more profitable than P2P is a slanted argument at best. There are simply more free games than paid ones. Period. This is the exact reason why F2P got a bad name in the first place: It requires a discerning player to separate out the good from the bad. But then again, even the crappy ones make money and add to their “side.” It certainly speaks to our impulsivity, but it’s not the greatest ground for comparison. It also ignores initial box sales in favor of subscriptions and holds that against years of mini-sales by the spending five percent. A game that sells 500k boxes still makes a 24 million dollar initial return. How much do even big cash shops make? If we agree that only a small percentage of players ever buy anything in the cash shop, how big of an active and dedicated fanbase do you need to make similar numbers? The only way these games are more profitable is in the long-term, which agreeably is preferable but not a guarantee of each game ever making some huge profit compared to their P2P brethren. That is unless their production costs are far, as in millions and millions, less — and doesn’t that support the argument that F2Ps lack in quality? That or they’re efficient, take your pick.

Then again, we’re never going to know the truth of it because companies don’t reveal these hard numbers. So all we have is anecdotal evidence and company press releases (read: “We made X dollars on 18 different games”).

In the end, I’m really just sharing this to record my thoughts on this year’s Eternal Argument.

Note: Nothing against Beau, too. His comments made me think and I respect his opinion. This particular argument has always bugged me a little bit and I’ve finally figured out why.

7 comments

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  1. Green Armadillo

    The harder part about sorting out this argument is that business models tend to be tied to development budgets – if you’ve sunk $50-100 million in the game, giving it away for free to see whether people will spend a billion dollars on minipets is less of an option. So, you’re comparing smaller F2P games – with less ground to cover before they turn a profit – to more ambitious subscription games that are going to need to hit it ridiculously large to deliver the same return on investment simply becaue the investment was larget.

  2. Eliot

    I think there’s another interesting angle to look at here: how long will free-to-play games remain profitable? Some do, others don’t, that’s a given, but is there a point that the business model breaks down? How many times will people buy content in, say, LotRO before it turns old and they stop caring?

  3. Ferrel

    I can safely say that if Rift was cash shop based I’d be far less enthusiastic about it. I got burned with EQ2 so I’m pretty much pro-sub again!
    Ferrel recently posted..Shaman Soul Guide Updated

  4. Stabs

    I’m enjoying Rift immensely because I’m playing it tons. I guess for me, as someone who gets very enthusiastic at times, pay for a month works much better than pay as you go.

    I have in the past enjoyed the free to play model, partly because I see it as a minigame in itself, of maximising access while paying the minimum.

    For me F2P puts a upper ceiling on my enthusiasm. I can enjoy playing a F2P and have a number that I’m interested in trying or returning to but I can’t go nuts on one because I know it could lead to me spending thousands. (I spend about £5000 on Magic: The Gathering in the mid 90s).

    As a customer both models work on me, even to the point I spend money in both systems (once I’ve figured out how to cheapskate I don’t necessarily get by without paying – the interest is figuring it out). However I will never (again) fall head over heels in love with a game where you can spend your way to victory.
    Stabs recently posted..The Great Game of Capture the Healers

  5. sean

    except that the objection – that there are more F2P games than P2P games, thus there’re more profitable F2P games (the law of numbers….) is flawed, as there *are* very simple and easy ways to judge the relative profitiability of MTX (microtransaction) vs Subs games: comparisons.

    we can, for example, compare ARPUs (Average Revenue per User): P2Ps give 8-13 currency units per user, depending on monthly sub rates; F2Ps give figures in the order of 3-5 currency units (whether you use dollars, pounds, euros or zlotys makes no difference; with the exception of zlotys the pricing is always basically static by currency unit. yes, it sucks to be paying in pounds sterling).

    we can also compare ARPPUs (Average Revenue per Paying User): P2Ps give again, 8-13 currency units; MTXs give figures around 30 (!) currency units per month.

    ok, comparisons by user, paying or otherwaise, are good, but scale factors in here: popular games (Maple Story, Free Realms, WoW) have numbers that far exceed smaller games, so they’ll make more money even if their per user rates are lower (whether they are or arent, that is; it’s the law of numbers again).

    but we can also, now, compare payment models for the *same* game, as several high profile Western MMOs have gone MTX: and LOTRO in particular are reporting a 400% increase in revenues on the back of a 300% increase in players. we might want to make an exception with DDO, agree that going MTX was a Hail Mary pass – but LOTRO was stable, profitable and high profile. it has seen a 400% increase in revenues… i’ve argued for a long time (in reports and proposals) for F2P models, on the basis that logically they’re more profitable; but LOTRO provides the definitive evidence: 300% increase in players, 400% increase in revenues, for a game that wasn’t struggling to begin with.

    the other benefit of the MTX model is that “the newbie hose continues to spurt”: as long as the barrier to entry continues to be 0 currency untis, there’s an effectively infinite population. look for example at the recent comments from SOE on Free Realms: over 17 million players now, and they fully expect and are planning for 100 million – because there’s a never-ending stream of teens and tweens in the world.

    of course, the real argument is ‘is it MTX *or* P2P, or a spectrum of models from pure subs to pure item malls?’; and the answer is ‘the latter’. My suspicion is that, in the medium term, the No. 1 Western MMO and its current ‘challenger’ will be pure P2P – the latter solely for reasons of prestige – all the other high profile Western MMOs will be mixed models like LOTRO, and the cheap localised games, the traditional ‘F2P’ games, will be pure item malls.

  6. KaiZen

    How many times will people buy content in, say, LotRO before it turns old and they stop caring? zombie survival games online free

  7. Quincy Nieva

    However I will never (again) fall head over heels in love with a game where you can spend your way to victory.most fun game on xbox one

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