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?