Trends in free-to-play gaming

Nexon is a leading provider of free-to-play games with revenue over $230 million in 2005. Nexon America's vp of Marketing, Min Kim, spoke at the Austin Game Developer Conference and outlined the trends that are driving the market and why FTP games must remain free to keep users engaged.

Trend 1: Demand for Online Entertainment is Growing
--Kids are already hooked on computers and will only further embrace online games

Trend 2: Imports are Big Business
--Asia is driving many of the business models and opportunities for gaming in the U.S.

Trend 3: Free to Play is Misunderstood
--There are more ways to make money than just virtual goods.

Trend 4: The Battle Between Publishing vs. Self-Publishing
--I'm not sure I understand this one, but basically Kim seems to say that investors are driving developers to publish themselves rather than as part of a bigger studio.

In the past I have compared gaming to open-source software, and there definitely are some similarities. However, unlike recent open-source models, where vendors try to monetize users based on "upgrades" to additional features, Kim argues that free-to-play must remain totally free. According to Kim:

Free to play doesn't imply the concept of shareware. If you're entering the market, you should be offering the full experience to all players. Additionally, expansions and additional content added to the game should be free. These components are just not where free-to-play games make their money.

Players shouldn't be locked out of major features or areas of the game. If a player can't experience the full game without paying, they're going to feel pressured by friends to put up money. Don't bombard players to upgrade; ultimately you want the player to want to pay you. Spending money should feel like a positive experience!

Open-source projects that don't have differentiation between community (free) and enterprise (paid) versions have had difficult times generating revenue. Maybe there is something to be learned from gaming?

[silvervein]

You failed to mention what they ARE doing for revenue aside from virtual goods.

[alampitt]

Dave, for your readers' background information, it looks like Nexon indeed uses a "pay for add-on" business model, but it is oriented more towards mostly "personalized experience" rather than features/functions.
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http://www.gamespot.com/pc/rpg/maplestory/news.html?sid=6162389

"innovative cash shop offers players the option to use real currency to pay for game enhancements -- from cosmetic items such as haircuts and plastic surgery coupons to virtual pets that can be trained to sit, stand, and breathe fire. This feature is purely optional and players can try out items prior to purchase in a virtual dressing room."

The foundation of all Nexon America titles is the "item" business model, in which users access the full game for free and can later opt to pay for game enhancements.
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Personalization might work for a consumer business model, but I suspect businesses typically do not say "fantastic product, but do you have it in blue? I will pay big money for blue." I suspect that businesses opt for add-on features/functions, eg, pertaining to niche or high-performance requirements, rather than personalization.

Wouldn't you agree? I am interested to know if you have other ideas.
-andrew

[daverosenberg]

Good points. I guess it's all in the eye of the beholder. Personally I think that personalization flies for awhile but only when non-recurring.

[crusadex]

off the subject a bit.Why doesn't a game company make an OS.The unreal engine is stable,networkable,3D,lends itself well to input output.if you think about it these guys have been making OS's all along,probably better ones than MS or linux can come up with becuase gamers are alot more fuss about glitches and loopholes.