The top of the bestseller charts in Apple's app store looks rather different from what you might expect. The first 65 places this April were occupied exclusively by free apps. Nearly all were games, with names like Clash Royale, Game of War, Mobile Strike and Candy Crush Saga.
But how can games users don’t pay for break turnover records for the manufacturers? The answer is in-app purchases – small investments to make the game more interesting, like buying a better weapon or a tool to master a particularly complicated level. A lot of games also have built-in “wait times after you have lost a certain number of rounds. These waiting periods, which may just be minutes at the start but can become hours and even days later on, can be cut short in return for payment.
This concept is known as Free2Play or F2P. It is not a genre but a revenue model. F2P players run virtual farms, fight medieval battles or look for three precious stones of the same colour on a board. Even classic games like Patience or Mahjong can be found as F2P versions.
The idea is that you no longer have to buy games. They can be installed and played free of charge, which ensures that they are extremely widespread. But in return for money you can make life easier for yourself. Unlike the “freemium” model, which provides basic services free but charges for advanced features, there’s no fixed monthly tariff. As a rule, the F2P players pay for things that are used up in the game and so have to be repurchased again and again.
The prices may seem low, but they add up to a decidedly lucrative business. Experts estimate that the game Clash Royale alone is bringing in its manufacturer Supercell around US$2 million (£1.54 million) in the USA and on the iOS platform – every day. And, of course, it is also available on Android and in countless other countries. By comparison, the music streaming service Spotify only achieves a tenth of that turnover with its subscriptions.
For many players F2P is actually as the name suggests: free. The percentage of players who buy extras (the so-called conversion rate) is largely single digits. “On the mobile platforms with a lot of occasional players, you can be satisfied with 3%,” says Teut Weidemann, a game developer. He has been active in the sector since the 1980s and helped create more than 100 titles. He knows the business inside out, from the old Commodore 64 to the smartphone, from programmer to executive. He has been advising firms like Ubisoft on the F2P business for about 10 years. “Free-to-Play has increased the worldwide gamer community about tenfold,” says Weidemann. “A games console like PlayStation sells per generation, meaning a period of several years, around 100 million units. In the F2P market a single game often has that number of users.” He thinks the Wargaming firm is especially clever. “Its CEO, Victor Kislyi, once mentioned a pay quota of 25%. That would be extremely high, but it is correct – as far as I can judge from the data available to outsiders.”
Wargaming was founded in Minsk in Belarus in 1998. It now has 18 sites around the world, including the Paris suburb Boulogne-Billancourt, where cars used to come off the assembly line at Renault’s main plant. Today it’s where Wargaming sells virtual tanks to 180 million players all over the world. In World of Tanks (a bestseller for PCs, PlayStation, Xbox and – as World of Tanks Blitz – on smartphones and tablets) two teams fight it out in tank battles. The game offers a selection of more than 500 Second World War models.
In the early stages only a handful of these can be accessed. Gamers have to earn the toughest tanks in several hundred fights – or pay for them. More accurate marksmen, better ammunition and extra parking in the garage can all be acquired faster, for a fee.
“In the past people paid €50 (£45) for a computer game and after a time it was played out. You can play an F2P game like ours for years,” says Nicolas Rodeghiero, the head of European marketing at Wargaming. “Each player can decide for himself if he wants to spend money, and if so how much.”
It seems that this model means the sector has come up with what might be called the Holy Grail of the market economy: perfect price differentiation. The company can set and get the maximum price that each individual customer is prepared to pay. With games like World of Tanks the price gradations are practically limitless. A youngster plays free, because he has little money but enough time to win the expensive tanks. An adult who has less time to play but more money might willingly pay hundreds a year for more ammunition and stronger tanks. Once players have begun investing money in a game they have an incentive to continue. The market research firm Slice Intelligence discovered that players of Game of War who cross the pay barrier then spend an average of US$549.69 a year on it. With Clash of Clans average revenue per paying user (ARPPU) is US$112.99 a year.
Weidemann reckons he has so far spent about €3,000 euros playing World of Tanks. “For me and many other people, the game is my hobby,” he says. “At the same time, it is my job to analyse such games.” Players like Weidemann who regularly invest substantial amounts in games that are supposed to be free are known in the trade as “whales”. “It’s a balancing act for every developer,” he explains. “If I spend money on a game, there must be an appreciable change in how I experience it. I have to get a kick, like on a roller-coaster. Otherwise I’m not going to spend any more.” But at the same time the paid-for advantages must not be too big. If it gets too one-sided, those playing for free will pull out, amid mutters of “pay2win,” and without them the paying gamers would have hardly any opponents.
“We pay careful attention to making sure that the advantages that a player gets by paying are not too big,” says Rodeghiero. “That is the only way to retain all gamers long term. Some of them have been playing since World of Tanks launched six years ago.” Keeping players interested is known as retention. “Good F2P games are played by some individuals for years and by the whole community for decades,” says Weidemann. “These games are designed so that they never end.” He predicts that a game like Clash of Clans, which has been earning his firm profits running into millions for years, will still be in the top 10 of the app store in 10 years’ time. Unlike a classic game that is devised, produced and delivered, F2P games keep on growing. Players stick with the game because they are regularly offered new content and extensions. Competition is fierce and the threshold for gamers to try out new and (initially) free games is low.
Wargaming also has to constantly offer regular customers something new. That is why certain premium tanks are only available for a limited period. Then there are also seasonal games, like at Christmas, when the players can fire arrows with suction cups at each other. And naturally there must always be new incentives to spend money. “We analyse the playing habits and on that basis we make personalised offers for players to buy things,” says Artiom Muraska, who produces the PC version of World of Tanks. “But nobody has to spend money,” he is quick to add. “You can achieve everything free – if you play long enough and well enough.”
Is the proportion of paying gamers really around 25%? Nobody at Wargaming wants to confirm the figure. The company also keeps to itself how much an average player spends each month. The only figures that are revealed are the average time a player sticks with the game (“well over a year, so considerably longer than usual in the sector”) and the number of users registered worldwide: 180 million.
Game manufacturers can hardly be blamed for wanting to make money. The F2P model is also effective protection against software piracy, which caused a lot of headaches for a long time. However, the question is whether the essence of gaming has changed as a result of the F2P concept. Must being entertained now be relegated to a backseat behind patience and self-control? Anyone playing games like World of Tanks, Candy Crush Saga or Clash of Clans is constantly offered tempting short cuts: “Wait 48 minutes till your magician is ready for use again – or cure him instantly for 37 diamonds”. “Hope no other player raids your castle overnight and steals your money – or get protection for €0.99.” What is supposed to be an amusing pastime becomes a permanent “marshmallow test”* of deferred gratification.
“The F2P model requires games with a high replay value and high bonding force,” says Linda Breitlauch, professor of game design at the University of Trier. “In itself that is not a bad thing. But there are also manipulative mechanisms that systematically frustrate players at many points. And there’s a lot of focus on how high the carrot has to dangle for as many players as possible spend as much money as possible.” However, she adds, nowadays the sector is more professional, fairer and more transparent than it was even a few years ago.
Maic Masuch, a professor of media informatics at the University of Duisburg-Essen, agrees. “Many producers overstepped the mark,” he says, referring to the 2000s when firms such as Zynga dominated the market with Facebook games like Farmville. “After a while people felt exploited and taken for a ride. Gamers are more sensitive than many people thought.”
On the one hand, F2P games often have a long life and bind their players for years. On the other, practically no games firm manages to produce one long-term success after another. German producers like Bigpoint, Gameforge and Wooga have become less influential. Zynga, which according to its founder Mark Pincus used “every trick in the book” to earn money, has been cutting staff for years. And the Finnish firm Rovio, whose Angry Birds game was downloaded more than 2 billion times, has not landed another hit.
A rare exception is Supercell, a Finnish company which first topped the app hit lists for years with Clash of Clans and then followed it up with the at least equally lucrative Clash Royale. In June 2016 the Chinese internet concern Tencent bought an 83.4% stake in Supercell for US$8.6 billion.
It is on mobile devices, where Supercell was particularly successful, that the F2P concept is rapidly gaining ground. “More than 95% of total turnover of the app stores comes from F2P games,” says Weidemann. “And the mobile F2P market alone now accounts for more than half of all games turnover worldwide.”
Other games are free because they are funded by advertising. So in all, nowadays it is very difficult to try to put a price tag on a smartphone game, as Nintendo discovered in December 2016. When it brought out the long-awaited iOS version of its classic Super Mario Run, only a couple of levels were free. Anybody wanting to progress had to pay a one-off charge of €9.99. In the past that would have unremarkable, but this time it triggered an outcry: thousands of people complained, there was a hailstorm of negative ratings, and analysts were unanimous that the company had missed a great sales opportunity.
Experts expect that in 2017 about 95% of all apps downloaded will be free. In Germany, app sales represent less than 5% of revenue – the rest comes from in-app purchases for originally free apps. What is more, fixed prices are also less attractive for the developers. Once bought, a user may never pay the game again but the updates for every new operating system version still have to be produced.
The F2P model is also carrying all before it in the console market, which used to be the preserve of the AAA titles: sophisticated games produced on budgets comparable with those for Hollywood films and which sell for €50 or €70. “Titles like that will die out,” says Charles Onyett, who used to write for the multimedia portal IGN and now works for Apple. And the world’s two biggest video game firms, Activision Blizzard and Electronic Arts (EA), are starting to back the new revenue model. “Sooner or later every game will have in-game purchases, but the game itself will come free,” EA executive Peter Moore told the online magazine Kotaku in 2012. “After all, it doesn't cost anything to go into a clothes shop and look at the jeans. It’s only when I want to have a pair that I have to pay.”
In nearly all games there are two currencies: one that you automatically win in the game (for example: gold) and one you can buy in exchange for real money (for example: diamonds). In fair games, diamonds are helpful but never indispensable and from time to time you may get them free of charge. Unfair games make it impossible at a certain point to progress without diamonds, which are only available for payment in real money.
In order to obscure what objects in the game actually cost, not only the prices in the game but also the conversion rates into the game currencies are blurred. For example, a suit of special armour costs 1,350 diamonds, but a pack contains 1,700 diamonds and costs €8.99.
The currency packages always leave unused amounts. These “spare” diamonds are an incentive to buy some more.
At the end of a round, gamers are offered the opportunity to buy diamonds, perhaps for an additional life. There’s a button to buy on the left, and a button to decline the offer on the right. From time to time, however, the buttons are switched. Inattentive gamers buy by mistake and spend more diamonds.
To get players to return to the game every day, little daily presents are offered. But they do not mount up if the player is absent for several days. Moreover, the value of the presents varies widely, because chance rewards release more dopamine in gamer brains than constant and predictable ones.
A certain benefit (e.g. inventory slots) is granted free for a while. Once the player has got used to having it, a price is set. If this is not paid, the objects stored in the space are lost.
Players who have bought “boosts” at difficult levels are deliberately allocated particularly difficult levels when they stop paying. If they stop playing for a long time, they are sent a message and then set a particularly easy level, to encourage them to enjoy the game again.